When you choose a health care insurance plan, the two most common options are HMO and PPO medical plans. Before you decide which plan is best for your medical coverage, you’ll need to understand HMO and PPO medical plans pose major differences.

Health Maintenance Organizations (HMO)

HMOs are networks of doctors, health care providers, and medical facilities. When you purchase this form of insurance, you lock yourself into receiving all of your health care from this network. Otherwise, you’ll be required to pay most or all of the medical bills yourself.

As an HMO member, you choose a primary care physician who will be your point of contact for any medical condition. Your physician can then refer you to specialists or other providers in the network. For example, if you have an orthopedic injury you’ll first need to see your primary care doctor, who will refer you to a specialist to help you.

While the primary care physician may seem like a nuisance at times, their job is to keep costs low by preventing unnecessary visits to specialists and to improve health care by being involved in all types of patient care.

Like HMOs, PPOs involve a network of medical personnel and facilities. When you purchase one of these plans, you’ll most likely choose a family physician from within a network of providers. However, you don’t have to choose just one doctor.

If you prefer a doctor outside the network, you can use their services but you’ll be responsible for a larger chunk of the bill. You also won’t need a referral from your doctor to see a specialist. If you have an orthopedic injury, you can skip straight to the orthopedist’s office.

PPOs do offer lower premiums in most cases but can end up costing you more because of the higher deductibles, the co-insurance, and larger co-payments. For example, if you need surgery for an injury, your insurance won’t cover the entire cost even if you choose a surgeon and hospital in the network.

Instead, you may face a 70%-30% or 80%-20% split meaning you end up paying 20% to 30% of the bill. Your portion will be higher if you choose medical providers outside the network.

Choosing HMO or PPO

Neither approach is necessarily better or worse than the other. The choice depends on your medical needs. If you see the doctor frequently, an HMO may save you money because of the lower co-payments for office visits. On the other hand, if you don’t like the idea of having a gatekeeper determine if you need to see a specialist you might prefer a PPO.